Fed Exaggerates Muni Default Risk

While many tiny, risky bond issues may default, actual investor losses are minimal for mainstream municipals.

First came the infamous forecast of hundreds of billions in municipal-bond defaults. Now comes a study purporting to show the history of muni-bond default risk to be far worse than anybody ever realized.

While that forecast has been proven to be totally erroneous, the historical study contains a grain of truth -- out of a huge pile of misleading...